Health Insurance Glossary

Accredited (Accreditation): Accreditation proves that a health care facility meets a specific set of quality standards. An accredited health care facility must regularly meet guidelines set by a nationally recognized board or group in order to keep its accreditation.

Accumulation Period: The period in a health insurance policy in which accumulated deductibles and out-of-pocket expenses are calculated. Usually equal to one calendar year.

Administrative Services Only (ASO): A service which performers billing, health claims processing and other administrative services for an employer. The employer still bears all health insurance risks under an ASO plan.

Admitting Physician: A physician who admits a patient into a health facility.

Admitting Privileges: A doctor with the ability to admit new patients to an inpatient facility is said to have admitting privileges.

After Care: Follow-up treatments, usually necessary after a hospitalization or surgery.

Agent of Record: An insurance agent that represents a client for the purposes of buying or negotiating an insurance policy.

Ambulatory Care: Any health service which doesn’t require inpatient hospital care.

Ancillary Services: Services that are not administered directly by a doctor or health care facility which are related to patient care, such as diagnostic testing, anesthesia and lab work.

Any Willing Provider Laws: Laws which require health care plans such as HMOs to accept any health care provider that agrees to the relevant terms and conditions that the health plan requires of its other network members.

Appeal: A request from a policy holder to a health insurance provider to reconsider an insurance policy decision such as a denial of claim.

Assignment of Benefits: A document which allows hospitals or doctors to receive health insurance benefits directly from a patient’s health insurance provider.

Attachment: An attachment modifies a health insurance policy, usually by changing or clarifying specific aspects of coverage.

Beneficiary: Any individual who can receive the benefits of a policy.

Benefit: Payouts from an insurance company to a policy holder, claimant or beneficiary.

Benefit Cap: The maximum amount that a health insurance provider will pay in benefits over a specific period of time.

Board Certified: Physicians must be certified through examinations by a specialty board to claim a specialty. Specialists are referred to as board certified physicians.

Broker: An insurance agent who acts as a representative of a policy buyer. Brokers usually receive commissions.

Capitation: A regular, fixed payment that an HMO pays to its network of health care providers. The payment is based on the number of insurance policy holders who use each health care provider.

Care Plan: A plan written to explain the next steps of a patient’s health care.

Case Management: The process of designing appropriate health care plans to treat patients in a cost-effective way. Case management is intended to keep costs down while ensuring appropriate patient care.

Case Manager: An individual who manages patient cases and develops plans for cost-effective and appropriate patient health care.

Catastrophic Illness: Any serious, potentially chronic health condition, usually associated with heavy health care costs.

Centers of Excellence: Health care facilities which specialize in certain treatments or conditions.

Certificate of Coverage: The document which explains insurance coverage to the insurance policy holder.

Claim: A form which requests payment for a qualified loss.

Clinical Practice Guidelines: Expert reports on treatments and their efficacy.

Co-insurance: An arrangement in which an insurance policy holder pays for a percentage of the costs of a medical bills. This applies after any deductible on the policy. Co-insurance usually has a maximum limit.

Consolidated Omnibus Budget Reconciliation Act (COBRA): Legislation which requires group health insurance plans with over 20 employees to offer continued health insurance coverage for employees and their families for 18 months after those employees have left their jobs.

Concurrent Review: A component of utilization review in which a patient’s condition is monitored to ensure appropriate recovery and medical treatment in a cost-efficient way.

Contract Year: The period from a policy’s effective date to its expiration.

Coordination of Benefits (COB): When a person has several overlapping types of health insurance, a Coordination of Benefits provision establishes a coordination between the different health plans to prevent overinsurance or double payment.

Coordinated Care: A coordination of various health care providers to ensure the best possible treatment of individual patients. Synonym of managed care.

Co-payment (Co-pay): A fixed fee that policy holders pay for their health care services.

Cost Sharing: Any arrangement that shares the cost of health care between a policy holder and an insurance provider. Examples include coinsurance and deductibles.

Covered Benefit: Any benefit that is included in a policy holder’s health insurance coverage.

Covered Charges/Expenses: Expenses which are covered by a health insurance plan. Some plans may exclude certain types of medical charges such as prescription drug costs. Covered expenses are listed in an insurance policy.

Covered Person: An insurance policy holder and others covered by a policy.

Credentialing: Health care providers must be credentialed by an insurance company to join the insurance company’s network.

Creditable Coverage: Coverage that shortens an established waiting period for pre-existing conditions.

Critical Access Hospital: A hospital which provides emergency services, but with a limited ability to provide other services. Most critical access hospitals are in rural areas.

Custodial Care: Personal care that is necessary due to a medical condition.

Current Procedural Terminology (CPT): Terms and codes that describe health care services. CPT is established by the American Medical Association.

Deductible: An amount that an insurance policy holder must pay before an insurance company pays the remaining costs of health care expenses.

Deductible Carry Over Credit: Deductibles paid during the last three months of a policy which can count towards the next year’s deductible.

Defensive Medicine: Treatments which may be unnecessary but which are administered by physicians to avoid a lawsuit.

Denial Of Claim: An official refusal of a health insurance claim from an insurance company. Claims can be only be denied for reasons established in a health insurance contract.

Dependent: Any covered person who is dependent on a policy holder for support, usually a spouse, child or other qualified family member of a policy holder.

Designated Facility: A health care facility which provides an established set of services for the members of a health insurance plan. For example, organ transplants are often provided through a designated facility.

Discharge Planning: Planning by medical staff and a health insurance company for a patient’s discharge from a hospital or another health care facility. Discharge planning is used to lower health care costs and to ensure appropriate patient care.

Disenroll: To end health care coverage with a specific provider.

DRG (Diagnostic Related Group): The cost schedule which pays health care providers a set amount for certain types of services. Established and used exclusively through Medicare.

Effective Date: The date at which health insurance coverage becomes active.

Eligible Dependent: A dependent who meets all of the eligibility requirements in a health insurance contract, including but not limited to a valid relation to the policy holder.

Eligible Expenses: Health care services which are covered under a health insurance policy.

Employee Assistance Programs (EAPs): Employer-sponsored programs which provide mental health services for employees.

Enrollee: The applicant or employee who holds a health insurance policy.

Episode of Care: A period of time in which health care services are administered.

Evidence of Insurability: Proof provided by an insurance applicant to an insurance company of the applicant’s health, usually through an exam or through past medical records.

Exclusions and Limitations: Clauses which restrict some elements of a policy holder’s coverage.

Exclusion Period: See “Waiting Period.”

Explanation of Benefits (EOB): A statement sent by a health insurance provider. The Explanation of Benefits is sent after a health insurance claim and details the costs of a claim that an insurance company will pay for as well as the costs that a policy holder must pay.

Fee-for-Service: One of several health care payment systems. In a fee-for-service arrangement, health care providers are paid for each treatment or service.

Fee Schedule: A list of all of the charges issued by a health plan.

First Dollar Coverage: Under this coverage, claims can be covered without a deductible, but health insurance policies with first dollar coverage usually carry more expensive premiums.

Flexible Benefit Plan: An employer-sponsored plans in which employees have several choices of benefits.

Flexible Spending Account (FSA): A specialized tax-advantaged account which an employee can fund with salary reductions. The account can be used to pay for expenses that are eligible under the terms of the FSA.

Formulary: A list of prescribable medicines and their dosages. In health insurance, formularies are often provided by health care providers. The costs for formulary drugs is typically lower than the costs of non-formulary medications.

Free-Look Period: A time period in which a new insurance policy holder can cancel his or her policy for a full refund without penalties. Most free-look periods are 10 days.

Full-Time Student: College students who are both under a given age and over a minimum number of credit hours to qualify as full time under a health plan.

Gag Rule Laws: Laws that prevent insurance companies from discouraging or punishing physicians who give full health care information to their patients such as info on expensive or non-covered medications and treatments.

Gatekeeper: In an HMO or another managed care plan, a gatekeeper is a physician who approves specialized cared and various treatment options for patients. Costs may not be covered under an HMO if a specialist is not approved by the gatekeeper.

General Agent: An agent who represents a health insurance company in a given geographic area. The general agent works with both retail agents and insurance companies.

Grievance: An appeal of a health insurance provider’s decision to refuse coverage of certain health care services.

Group Health Plan: An occupation-based health plan which is generally joined or purchased through an employee organization or through an employer.

Guaranteed Issue: A term which restricts a health insurance company’s ability to deny coverage. If an applicant is protected by a guaranteed issue law, he or she cannot be denied coverage through a health plan due to a preexisting condition.

HCFA Common Procedure Coding System (HCPCS): A medical billing coding system used by health care providers and health insurance companies.

Health Care Provider: Facilities or individuals who deliver medicine, treatment and other types of health care.

Health Employer Data and Information Set (HEDIS): Measurements which provide data about the quality and specifications of a health plan. HEDIS can be used as a means of comparison for various managed care options.

Health Insurance Portability & Accountability Act (HIPAA): A significant health insurance law which expanded the rights of individual and group health insurance policy holders. HIPAA protects insurance coverage for workers who change careers or who lose their jobs and provides some protection for insurance applicants with preexisting conditions. HIPAA was passed in 1996.

Health Maintenance Organization (HMO): A type of health plan in which a primary physician acts a gateway, approving or denying requests for specialists and other services. HMOs require insurance plan participants to choose from a list of approved physicians and hospitals and benefits are restricted to health care providers which are members of the HMO.

Health Reimbursement Arrangement (HRA): A spending account that is both owned and funded by an employer. HRAs are tax-advantaged for employers, but employees must use the funds in an HRA before a year’s end for the maximum advantage.

Health Savings Account (HSA): A type of tax-advantaged savings account which can be used to pay for health care services. Requires enrollment in a High Deductible Health Plan.

High Deductible Health Plan (HDHP): An insurance plan with a high deductible, usually purchased with the intention of enrolling in a health savings account. In order to enroll in an HSA, an HDHP policy must fulfill some other requirements determined by the health plan provider.

Home Health Care: Health care services which are administered at the patient’s home or outside of a hospital or other medical facility. Examples include home nursing and physical rehabilitation services.

Hospice Care: Palliative treatments for terminally ill patients which improve quality of life but that are not intended to cure a patient’s condition.

Hospital Care: A general term given to claims which result from a hospital stay including both inpatient and outpatient benefits.

Hospital-Surgical Coverage: A special type of insurance coverage which only covers costs related to hospitalization or surgery.

Impaired Risk: Any applicant or policy holder who represents a higher than average risk to a health insurance provider due to occupation, health or for another reason.

Incurral Date: The date on which a health insurance policy holder uses health care services which are submitted to an insurance company as a claim. Incurral date is used to determine benefits. A claim with an incurral date that fell before the effective date of the health insurance policy will not be paid.

Indemnity Health Plan: “Fee for service” plans in which health insurance providers pay for a portion of a patient’s health care costs while the patient pays a set percentage, usually with a set maximum. Indemnity health plans were exceptionally popular in the years before other group health plans such as PPOs.

Independent Practice Associations (IPA): A special type of HMO in which physicians are independently contracted by the association. In a traditional HMO, physicians are actually employed by the health maintenance organization.

Inpatient Care: Defined in health insurance as care that requires an overnight stay. Most often refers to a hospital stay.

Insured: Any individual who is eligible for and who receives insurance coverage.

International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM): A coding system for patient diagnoses. The ICD-9-CM is used by health care providers and insurers in many countries and is established by the NCHS and the CMS.

Lapse: A period in which insurance coverage is cancelled due to non-payment of policy premiums.

Lifetime Maximum: A maximum limit set on the benefits paid for a given health insurance policy over its entire duration. Lifetime maximum limits are regulated by state and federal law and may not be legal after the passing of the Affordable Care Act (AFA). Before the AFA, most health insurance policies had a lifetime maximum of $5 million.

Limited Policy: A special type of health insurance policy which only covers costs from certain illnesses or conditions. Limited policies are popular with students and other relatively young and healthy individuals.

Major Medical: A special area of health insurance coverage which pays for major expenses, including the costs of hospitalizations and surgeries.

Managed Care: A plan which manages health care costs and quality. PPO and HMO plans are examples of managed care plans.

Master Policy: A policy which provides insurance coverage and definitions for a group.

Medicaid: A Federal and state program which offers low-cost or free health insurance coverage to eligible individuals with low incomes.

Medical Necessity: A health care service which can be shown to be absolutely necessary for effective patient treatment.

Medicare: Administered by CMS, Medicare was established to provide health insurance assistance for individuals over the age of 65 and individuals with certain diseases and disabilities.

Medicare Supplement: An insurance policy which is designed to pay certain health care costs for Medicare-eligible individuals that Medicare benefits would not cover.

Medical Savings Account (MSA): A type of health savings account which must be coordinated with a high deductible health policy. MSA owners can set aside funds to cover certain health care costs.

Medically Necessary: Health care costs which are necessary to ensure the continued health of the insured. Many common health care costs are considered medically necessary, but optional well-being visits to a physician’s office and elective surgeries may not be considered medically necessary and may not be covered by some health insurance policies.

Medigap: A special type of health care policy which is designed to provide benefits that Medicare will not provide. Designed for Medicare-eligible applicants., Medigap policies are usually inexpensive. See also “Medical Supplement.”

Misrepresentation: A policy holder’s attempt to mislead an insurance company. Misrepresentation can void a policy holder’s coverage.

Morbidity: The chances of illnesses, injuries and other medical conditions among a certain group.

National Association of Insurance Commissioners (NAIC): The body which ensures uniform insurance regulations nationwide. The NAIC is composed of state insurance commissioners.

National Committee for Quality Assurance (NCQA): A group which monitors and establishes standards for quality health care services.

National Drug Code (NDC): A system for coding and identifying drugs. The NDC is maintained and defined by the Food and Drug Administration (FDA).

Network: In a managed care plan, the network consists of health care providers which participate in the plan. Network providers offer lower rates to the health plan’s members.

Network Provider: Participating health care providers which offer lower rates to the members of a managed care plan such as an HMO or a PPO. See also “Participating Provider.”

Noncancellable Policy: Also known as a guaranteed renewable policy. A noncancellable policy cannot be cancelled by the insurer as long as premiums are paid in a timely manner.

Nonrenewable: Any health insurance policy in which an option for renewal is not offered after expiration.

Open Enrollment: A month or other period in which employees can switch their employer-provided health insurance to another provider. Individual health insurance buyers may also utilize open enrollment periods in their states with guaranteed protection from HIPAA.

Out-Of-Network: Health care providers who are outside of a health plan’s network of providers. Out-of-network providers are not covered under an HMO plan and are only partially covered under a PPO.

Out-Of-Plan: See “Out-Of-Network.”

Out-of-Pocket Costs: Various costs which an insurance policy holder must pay for health care including deductibles, co-payments and coinsurance.

Out-of-pocket maximum: A limit set by an insurance policy. When the out-of-pocket maximum has been reached during a period (usually within a policy’s calendar year), the policy holder’s insurance plan covers the rest of the out-of-pocket costs of health care services. Also known as a stop-loss limit.

Participating Provider: A provider who is part of a managed care network such as a PPO or HMO. Participating providers offer health care services at a set cost.

Permanent Insurance: A health insurance policy which is guaranteed renewable up to a certain age, usually age 65. Permanent insurance policies can only be canceled by an insurance provider if there is evidence of misrepresentation on the part of the policy holder or due to non-payment of policy premiums.

Policy: Insurance coverage granted through a contract to an individual and dependents.

Policy Year: A year starting from a health insurance policy’s effective date.

Policyholder: An approved applicant who is named and who receives coverage through an insurance policy.

Portability: In health insurance, a quality which allows health insurance coverage to be transferred from one insurance provider to another without penalties due to preexisting conditions.

Pre-Admission Review: A pre-admission review assesses the health of an individual prior to hospitalization or admittance to any type of inpatient facility. The purpose of a pre-admission review is to establish that inpatient care is the best option for the patient. Pre-admission testing may be one aspect of a pre-admission review.

Pre-Admission Testing: Tests which are required before a patient can be admitted to any type of inpatient facility including but not limited to hospitals.

Pre-Authorization: A contract provision which compels a policy holder to seek and receive authorization before a major medical claim is submitted.

Pre-Certification: Some health insurance policies require that certain treatments be pre-certified before they’re performed in order to guarantee full payment of a medical insurance claim. Before certain types of treatments are performed, a physician must notify the health insurance company that the treatment is necessary. Pre-certification terms, including information on the types of treatments which must be pre-certified, can be found in a policy holder’s health insurance contract.

Pre-existing Condition: A condition which a policy holder is aware of and which existed before a health insurance policy’s effective date. Pre-existing conditions can limit coverage. Many health insurance companies put waiting periods on coverage for pre-existing conditions. Some deny coverage entirely, although insurance companies’ rights in denying coverage due to pre-existing conditions have been severely limited by recent federal legislation.

Preferred Provider Organization (PPO): A type of managed care plan in which discounted health care services are provided through certain providers. While policy holders can save money for using these preferred providers, they’re under no obligation to do so and may use non-network physicians and medical services while still drawing some benefits. This is in contrast to an HMO, which does not usually offer benefits for unapproved non-network services.

Pregnancy Care: Refers to coverage provided by federal legislation which ensures that pregnancy and childbirth expenses are covered in the same way as other medical conditions under an employer’s health care plan.

Premium: A regular amount paid for health insurance, usually on a monthly or bi-monthly basis.

Preventive Care: A type of medical care which aims to prevent disease or to provide early treatment.

Primary Care Physician (PCP): The physician who serves as the first point of contact for a patient. Under some managed care plans (especially HMOs), a primary care physician provides the first line of treatment and the first assessment of patient health before specialists and other physicians are consulted.

Prior authorization: Authorization that a policy holder must obtain in order to ensure payment of a health insurance claim. Prior authorization is required for some types of treatments under certain health plans.

Provider: An individual or group which provides health care services such as a doctor or a hospital.

Qualifying Event: An event which affects an individual’s eligibility for health insurance coverage. This term is often used when discussing COBRA eligibility; an employee’s termination, for example, is a qualifying event.

Reasonable and Customary (R &C) Charge: See “Usual & Customary Charge.”

Referral: A physician will issue a referral when a patient needs a specialist, testing, a second opinion or other services that the primary physician can’t provide. Referrals from a primary care physician are required under some types of managed care plans before a patient can seek care through a specialist or other health care provider.

Renewal: The act of continuing a health insurance policy. Insurance premiums and other terms may be negotiated and changed during a renewal.

Rider: Any provision which changes the coverage of an insurance policy, including endorsements and attachments.

Risk: The chances that a policy holder will submit a claim. Risk is used to determine health insurance premiums. Factors like age, occupation, whether an applicant uses tobacco and the applicant’s medical history affects risk from an insurance provider’s point of view.

Schedule of Benefits and Exclusions: A list provided by a health insurance company which explains the limits of a policy’s coverage. Benefits are services which are covered under a policy while exclusions are not covered.

Second Surgical Opinion: When a physician advises an individual to get surgery, the individual has the right to seek a second opinion on whether that surgery is necessary. Physician visits and evaluations to determine the necessity of surgery are usually covered under a patient’s health insurance.

Self-insured (Self Administered): A federally-regulated type of employer-offered insurance in which an employer assumes the risk for all employee health care expenses. Self-insured plans may be administered directly by an employer or through a third party.

Service Area: The geographic area where a health insurer provides service. Service areas are common with managed care plans, and in HMOs, a service area may also be the only area in which network health care services are offered.

Short-Term Medical Insurance: A special type of health insurance coverage which helps a policy holder avoid a lapse in coverage and provides protection in between traditional medical insurance plans. Short-term medical insurance is nonrenewable and has a period of one year or less.

Skilled Nursing Facility: A facility which provides specialized health care services, usually for disabled or impaired individuals. A nursing home is a well-known example of a skilled nursing facility.

Special Benefit Networks: Networks which provide specialized services that might not be covered under a typical health insurance plan. Special benefits might include mental health services and prescription medications.

Staff Model: An HMO arrangement in which physicians are employed directly by the health maintenance organization. This is a common type of HMO and contrasts directly with an Independent Practice Association (IPA). See Independent Practice Association for more information on alternatives to the staff model.

Standard Industrial Classification (SIC): Classifications used by insurance companies to set the rates for group health plans.

State Insurance Department: A legal entity which supervises insurance companies within a state including health insurance companies. State insurance departments enforce state laws and sometimes provide insurance information for policy holders.

State-Mandated Benefits: Benefits that are legally required to be included in a health insurance policy by state law.

Stop-loss Provisions: Provisions which limit out-of-pocket expenses by setting a limit. After that limit is reached in a given period, health care costs are paid entirely by an insurance provider.

Third-Party Payer: Any person, group or company which pays for part of the health care costs of a patient. This includes but is not limited to insurance companies and the government.

Underwriting: A process in which an insurance provider assess the risks posed by an insurance applicant. Premiums are calculated and assigned through underwriting.

Urgent Care: A type of health care service for non-emergency situations that need quick treatment. Because urgent care services are far less expensive than emergency room services, they’re often recommended by insurance providers as a way of keeping costs down.

Usual and Customary (U&C) Charge: Also called a Reasonable & Customary Charge. U&C charges are standard charges which are expected for health insurance policy holders. U&C charges are usually determined by an insurance policy holder’s geographic area and may vary greatly from one state to the next.

Utilization Review: A specialized review which determines the feasibility, quality and necessity of health care services. Utilization reviews are conducted for the benefit of insurance plans and employers on a regular basis.

Waiting Period: In health insurance, the time period between a policy’s effective date and when medical costs due to a preexisting condition are covered by the health insurance provider.

Well-Baby Care: Health care services intended to prevent diseases in younger children. Well-baby care usually includes immunizations.

Wellness Office Visit: Any visit to a physician’s office to ensure wellness as opposed to a visit intended to diagnosis a sickness or physical condition.

Workers Compensation: Legally-required insurance coverage purchased by employers which protects an employee from the costs of hospitalization and treatment of illnesses and injuries that occur during the work day.

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